The Role of (Hyper-)Core Self-evaluations in Strategic Decision-making

8/14/2019 The Role of (Hyper-)Core Self-evaluations in Strategic Decision-making

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Strategic Management JournalStrat. Mgmt. J., 26: 297319 (2005)

Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/smj.455

CONCEPTUALIZING EXECUTIVE HUBRIS: THE ROLE

OF (HYPER-)CORE SELF-EVALUATIONS IN

STRATEGIC DECISION-MAKING

NATHAN J. HILLER1 and DONALD C. HAMBRICK2*1 College of Arts and Sciences, Florida International University, Miami, Florida, U.S.A.2 Smeal College of Business Administration, Pennsylvania State University, UniversityPark, Pennsylvania, U.S.A.

Researchers have long been interested in how an executives self-concept affects his or her behav-iors, but have lacked a theoretically grounded, validated construct for conducting systematicinquires. The concept of core self-evaluation (CSE), which has been recently validated in the

psychology literature, concisely encompasses and consolidates the common, overlapping portionsof four previously unconnected personality dimensions: self-esteem, self-efficacy, locus of con-trol, and emotional stability. CSE has great potential to provide substantial leverage for researchon executive self-concept. We review and reconcile prior research on related constructs in exec-utive settings (including narcissism, hubris, and overconfidence) and argue that CSE should beadopted as a robust, well-validated umbrella construct for research on executive self-concept.

Indeed, a very high level of CSE, or hyper-CSE, aligns closely with what is often colloquiallycalled hubris. We anticipate that hyper-CSE executiveswho possess supreme levels of self-confidence, self-potency, and conviction that they will prevailwill manifest this trait in their

job behaviors. We develop a set of integrated propositions that describe the implications of CSEfor strategic decision processes, strategic choices, and organizational performance. Finally, wepropose additional avenues for research. Copyright 2005 John Wiley & Sons, Ltd.

All the extraordinary men I have known wereextraordinary in their own estimation.

Woodrow T. Wilson

The most useful thing I learned was to be humble. . .

Larry Bossidy, Former CEO of Allied Signal

Among the most central, fundamental components

of individuals is the basic conviction they have in

themselves. As the two quotations above indicate,

conflicting views exist about the merits of positive

Keywords: upper echelons; core self-evaluation; hubris;executive self-perceptions; decision speed; strategic per-sistence*Correspondence to: Donald C. Hambrick, Smeal College ofBusiness Administration, The Pennsylvania State University,440 Beam Business Administration Building, University Park,PA 16802, U.S.A. E-mail: [email protected]

self-concept. This tension is especially relevant in

the top executive arena. On the one hand, execu-

tives who have highly positive self-assessments are

thought to be able to create and seize opportunities

and to motivate their organizations in ways that

less confident executives cannot (Barnard, 1938;

Bass, 1990, Ch. 10; Keegan, 1987). But these

same executives may be likely to engage in unin-

formed or excessive risk-taking, grandiose initia-

tives, and acts of intimidation (Hayward and Ham-

brick, 1997; Kets de Vries, 1994; Van Velsor and

Leslie, 1995).

Although a substantial amount of research on

top executives has been conducted over the last

20 years (summarized in Finkelstein and Ham-

brick, 1996), scholars still only possess a frag-

mented understanding of the origins and implica-

tions of executive self-potency. A chief obstacle

Copyright 2005 John Wiley & Sons, Ltd. Received 14 January 2004

Final revision received 29 October 2004


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298 N. J. Hiller and D. C. Hambrick

has been the absence of any rigorous conceptual

apparatus for conducting such inquiries. The few

attempts to explore executive self-potency haveinvoked an array of disconnected concepts, includ-

ing those that address only narrow slices of overall

self-assessment (notably, locus of control) (Boone,

De Brabander, and Hellemans, 2000); colloquial

concepts that, despite intuitive appeal, lack rig-

orous psychological and methodological ground-

ing (hubris) (Hayward and Hambrick, 1997); psy-

chopathological concepts that are difficult to oper-

ationalize beyond clinical settings (narcissism)

(Lubit, 2002); and constructs that describe exec-

utive self-concept only on a post hoc basis (over-

confidence) (Malmendier and Tate, 2003).Recently, psychologists have made considerable

progress in identifying and validating a fundamen-

tal construct that holds considerable promise for

advancing theory and research on executive self-

assessment. Specifically, Timothy Judge and co-

authors have developed the concept of core self-

evaluation to describe how individuals broadly

evaluate themselves and their relationship to their

environment across situations (Judge, Locke, and

Durham, 1997). This concept, which has been

extensively validated over the last 5 years with a

wide array of subject samples, has the advantage

of providing considerable parsimony for theory-

building in the area of self-assessment. Findings

indicate that the concept of core self-evaluation

(CSE) concisely encompasses and consolidates

the common, overlapping portions of four well-

studied, but heretofore unconnected, concepts: self-

esteem, self-efficacy, locus of control, and emo-

tional stability (Judge, Bono, Erez, Locke and

Thoresen, 2002; Judge, Erez, Bono, and Thore-

sen, 2002; Judge, Erez and Bono, 1998). These

four concepts are not identical, but they do share

significant conceptual similarities, and it is this

area of similarity that constitutes the basic, fun-damental assessment an individual makes of one-

self. As we shall discuss below, Judge and col-

leagues have found that CSE leads to more potent

and parsimonious predictions of individual behav-

iors and outcomes than do the individual vari-

ables.

Although several papers have identified, vali-

dated, and applied the CSE concept, its relevance

for the study of top executives and their behav-

ior has not been considered. Applying CSE to

the executive arena does not involve an obvi-

ous, linear transposition. Judges work has focused

primarily on the liabilities of having too lit-

tle CSE, or on the benefits of having a req-

uisite, threshold level of CSE. In a variety ofsamples, those people who evaluated themselves

positively were more satisfied with work, per-

formed better, and dealt with upheaval better

than those lacking such self-assessments (Erez

and Judge, 2001; Judge, Erez, and Bono, 1998;

Judge, Locke, Durham, and Kluger, 1998; Judge,

Thoresen, Pucik, and Welbourne, 1999). As such,

Judge and co-authors have not had much spe-

cific interest in the upper end of their scale

and, particularly, have not considered the impli-

cations of having an extraordinarily high level

of CSE.Stereotypes aside, there is reason to expect that

many executives have relatively high CSE, and a

significant proportion may have exceptionally high

CSE, or hyper-CSE. As we shall argue, execu-

tive behaviors at the very upper reaches of the CSE

scale may not conform to Judges more is better

thesis. For example, we anticipate that hyper-CSE

executives are inclined to take grandiose actions

that can easily lead to catastrophic resultsas a

result of their personal conviction that they can

do no wrong (or fix all wrongs that may turn

up). Thus, the high end of the CSE scale aligns

very well with what is colloquially called hubris.

Judge and co-authors may have laid the foundation

for rigorous examination of the syndrome that to

the ancient Greeks was mans capital sin (Hay-

ward and Hambrick, 1997).

Our paper is organized as follows. In the next

section we provide an overview of the CSE

construct, including discussion of its conceptual

underpinnings and validity. Next, we introduce the

idea of applying CSE to the study of executives;

we address research that has dealt with related con-

structs, including hubris, narcissism, locus of con-

trol, and overconfidence. We then develop proposi-tions regarding the strategic decision-making pro-

cesses, strategic choices, and performance conse-

quences that follow from high-CSE executives. We

limit our propositions only to those dealing with

strategic decision-making and performance, omit-

ting for now consideration of the potentially impor-

tant effect of CSE on executives leadership behav-

iors and interactions with others. Next, we discuss

the issues associated with measurement of CSE

in executives, suggesting some refinements and

accompaniments to existing measures. We close

with a brief inventory of research opportunities.

Copyright 2005 John Wiley & Sons, Ltd. Strat. Mgmt. J., 26: 297319 (2005)


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Core Self-Evaluations in Strategic Decision-Making 299

THE CONCEPT OF CORESELF-EVALUATION

A core self-evaluation (CSE) is a deeply sourced

dispositional trait that defines how we evaluate

ourselves and our relationship with the environ-

ment (Judge, Bono, Erez, Locke, and Thoresen,

2002). Thus, CSE is a relatively enduring and fun-

damental evaluation of oneself as an individual,

essentially akin to self-concept (Judge, Thore-

sen, Pucik, and Welbourne, 1999). At a basic

level, the high-CSE person is characterized by self-

confidence, self-worth, self-potency, and freedom

from anxiety.

In developing the CSE concept, Judge and hiscolleagues (Judge, Locke, and Durham, 1997)

searched domains including philosophy, as well

as clinical, developmental, personality, and social

psychology, and distilled a common theme about

appraisals of the self running throughout these

literatures. After examining various existing per-

sonality traits that might be partial indicators of

this overarching concept, they empirically exam-

ined and found evidence for the existence of

a widely held, basic appraisal of the self: a

core self-evaluation (CSE). Since its initial con-

ceptualization, numerous top-tier journal publi-cations, based upon a variety of samples from

four continents (including Europe, Asia, Australia,

and North America), have indicated that CSE

is the common core, or central factor, of four

heavily studied human qualities: (a) self-esteem,

(b) generalized self-efficacy, (c) locus of control,

and (d) emotional stability (which is sometimes

known by its opposite, neuroticism). That the CSE

trait is fundamental means that it is a source,

or central, trait, underlying and causing more

peripheral traits1 (Cattell, 1965; Rokeach, 1972).

Validity of the CSE concept

Thousands of studies have investigated the four

traits that make up CSE. Yet, only a small pro-

portion of these studies has considered more than

one at a time, and almost none considered all of

them simultaneously or as representative of an

underlying construct until the concept of CSE

was proposed. Since then, there is mounting evi-

dence that the four individual traits all impor-

tantly contribute to a latent unitary construct (Erez

and Judge, 2001; Judge, Erez, Bono, and Thore-sen, 2002; Judge, Thoresen, Pucik, and Welbourne,

1999; Judge, Locke, Durham, and Kluger, 1998).

Table 1 (left-hand side) presents meta-analytic

population estimates of the correlations (from

Judge, Erez, Bono, and Thoresen, 2002) among the

four component variables, based on a total of 127

primary study correlations and 33,854 individual

relationships. Using these estimates of the popula-

tion correlations, the right-hand side of the table

presents standardized factor loadings on the CSE

construct. As shown, the four component variables

are substantially related to each other, and each ofthem loads onto the CSE construct well above the

generally accepted minimum threshold of 0.4.

As a way to clarify the relationship between

the four components and CSE, we present a styl-

ized schematic as Figure 1. We emphasize that

1 For example, the deeply held source trait of dominance may beconsidered as a primary cause of arrogance (a peripheral trait;Judge et al., 1997).

Table 1. Meta-analytic relationships between self-esteem, generalized self-efficacy, emotional sta-bility, and locus of control, and factor loading on CSE construct

Self-esteem Gen. self-efficacy

Emotionalstability

Standardized factorloading on CSE

construct

Self-esteem 0.92Generalized self-efficacy 0.85 0.93Emotional stability 0.64 0.62 0.68Locus of control 0.52 0.56 0.40 0.59

Values for the correlation table are taken from Judge, Erez, Bono, and Thoresens (2002) meta-analysis ofstudies reporting correlations between at least two of the CSE component traits. The population estimates forthe correlations are based on a total of 127 primary-study correlations, representing 33,854 individuals. Factorloadings of each trait on the CSE construct were computed using LISREL 8.5 and are based on the meta-analyticcorrelation matrix; harmonic mean N = 3362.



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Figure 1. Qualitative portrayal of the conceptual space occupied by CSE

this figure is not meant to represent the quanti-

tative relationships involved, but rather is a qual-

itative aid to help explain the CSE construct. As

Figure 1 portrays (and as follows from Table 1),

the four component variables overlap considerably,

and CSE is at the core, or center, of their over-

lap. This schematic also allows us to point out

that there are aspects of the four component vari-ables that fall outside of, and do not contribute

to, CSE. For example, locus of control (LOC)

gauges the degree to which a person feels that lifes

events are within his or her control. LOC is not

meant to capture the degree to which the person

believes that his or her actions will generate pos-

itive outcomes. Still, there is probably some part

of LOC that captures that belief; after all, those

most inclined to believe that their actions will mat-

ter also tend to believe that their actions will lead

to salutary results. It is that part of LOC, then,

that conceptually loads onto CSE. Thus, CSE does

not encompass the entirety of all four constructs.

Rather, CSE represents a significant and common

core of the four component traits.

Beyond evidence that all four component traits

load highly on the CSE construct, research has

shown that this higher-order factor is more predic-

tive of a variety of job behaviors and outcomes

than are the four component traits. For exam-ple, CSE has been shown to be more consistently

and strongly related to job performance and sat-

isfaction, motivation, stress, and other personality

measures (such as conscientiousness and extrover-

sion) than are the four individual traits (Erez and

Judge, 2001; Judge, Erez, Bono, and Thoresen,

2002; Judge et al., 2003). Whether CSE is entered

into regression models before or after the compo-

nent traits, its effects generally dominate the four

individual dimensions. These results suggest that

the higher-order CSE construct is a better predic-

tor than the component traits used in isolation; both



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parsimony and explanatory power are greatly aided

by its use.

Four component traits

Because CSE is at the core, or captures the overlap,

of four human traits, it is important to review those

component concepts in order to better understand

CSE. Self-esteem, conceptually the most central

component of CSE (Judge et al., 1997), is an indi-

viduals global evaluation of self-worth (Baumeis-

ter, Smart, and Boden, 1996). Self-esteem refers

to an individuals overall self-acceptance, self-

liking, and self-respect (Harter, 1990), and it has

been related to various outcomes in non-executivesamples, including: successful handling of jobs

with ambiguous roles (Jex and Elacqua, 1999);

acceptance of change (Wanberg and Banas, 2000);

motivation and organizational commitment (Hui

and Lee, 2000); resistance to influence (Brockner,

1988); and restricted information search and policy

experimentation (Knight and Nadel, 1986).

Self-efficacy refers to ones belief in his or

her capability to successfully execute and per-

form tasks (Gist and Mitchell, 1992). Although

assessments of self-competence can vary some-

what depending on the task being performed (task-

specific self-efficacy), individuals possess a gener-

alized self-efficacy that is stable across domains

(Bandura, 1977). Most organizational research has

examined task-specific self-efficacy (e.g., Audia,

Locke, and Smith, 2000; Brown, Ganesan, and

Challagalla, 2001), but the limited literature on

generalized self-efficacy in non-executive sam-

ples has generally found relationships with overall

job performance and organizational commitment

(Gardner and Pierce, 1998), self-serving bias after

failure (Silver, Mitchell, and Gist, 1995), and cop-

ing with career-related events (Stumpf, Brief, and

Hartman, 1987).Locus of control is the belief one holds about

who or what controls the occurrence of life events

(Rotter, 1954). Individuals with an internal locus of

control believe that their fate is determined by their

actions, whereas those with an external locus of

control believe that what happens to them is deter-

mined by factors outside of their control. In empir-

ical studies of general populations, internal locus

of control has been found to be positively related to

variables such as skill acquisition, transfer of train-

ing and job performance (Colquitt, Lepine, and

Noe, 2000), acceptance of organizational change

(Wanberg and Banas, 2000), and positive job atti-

tude following promotion (Lam and Schaubroeck,

2000). There is a significant literature investigat-ing locus of control among executives, which we

will discuss below.

With origins in psychopathology, emotional sta-

bility has been identified as one of the Big Five

personality traits (Costa and McCrae, 1992) and

is sometimes known by its converse, neuroticism.

Because these labels can lead to various inter-

pretations, it is essential to understand that it is

anxiety that is at the heart of most measures of

this construct (Judge et al., 2003). Individuals who

score low on emotional stability (high on neuroti-

cism) are prone to worry, fear, stress, and feelingsof helplessness (Costa and McCrae, 1992); those

who score high have an absence of these qualities.

It is understandable, then, that emotional stabil-

ity covaries significantly with the other elements

of CSE. Individuals who have high self-esteem,

high self-efficacy, and an internal locus of con-

trolthose who are highly confident in their abil-

ities and who feel in control of their fatehave lit-

tle to worry or be anxious about. In organizational

research, emotional stability has been found to be

positively related to job performance (Ployhart,

Lim, and Chan, 2001), extrinsic career success

(Judge, Higgins, Thoresen, and Barrick, 1999), and

leadership emergence (Judge, Bono, Ilies, and Ger-

hardt, 2002).

CSE IN EXECUTIVES

Over the last 20 years, researchers have devoted

great effort to understanding how the character-

istics of executives are manifested in the strate-

gic choices they make and the performance they

deliver. The underlying premise of this researchhas been that senior executives confront so many

stimuli, laden with so much ambiguity, that their

personal schemastheir values, experiences, per-

sonalities, and other human factorsgreatly enter

into their interpretations of situations and the

choices they make. This stream of research, often

termed the upper-echelons perspective, has relied

on a combination of executive demographic char-

acteristics (e.g., functional background and tenure

in the company; Bantel and Jackson, 1989) and

psychological constructs (e.g., tolerance for ambi-

guity and risk aversion; Gupta and Govindarajan,



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1984) to predict organizational outcomes (Ham-

brick and Mason, 1984). Generally, these individ-

ual differences manifest themselves most stronglyin situations where the top managers have rela-

tively great discretion (Hambrick and Finkelstein,

1987), such as in situations of information over-

load, situations where cause and effect relation-

ships are not known, where regulatory or oversight

forces are minimal, and in small organizations

(Finkelstein and Hambrick, 1996; Miller et al.,

1982).

Although there have been no attempts to incor-

porate executive CSE into upper-echelons the-

ory, three of the individual component variables

that comprise CSE self-esteem, locus of con-trol, and emotional stability have been exam-

ined in the executive context (summarized in

Table 2). In an early study with limited data, Berry

(1978) surveyed executives of manufacturing firms

to establish how they accounted for their ascen-

dance to the upper ranks of their companies; he

found that self-esteem was considered one of the

primary factors in their success. Among the numer-

ous studies that have examined locus of control

in executive samples, the most pronounced and

recurring finding is that executives who have an

internal LOC (i.e., feel in control of their fates)

are associated with strategies involving innova-

tion and product differentiation. Moreover, inter-

nal LOC executives perform well when pursuing

those strategies; they perform less well when pur-

suing cost leadership (efficiency) strategies (e.g.,

Boone et al., 2000; Miller et al., 1982; Miller and

Toulouse, 1986a, 1986b). In the single study that

has examined emotional stability, Peterson and

colleagues (2003) used archival sources, such as

biographies and published interviews, to code the

emotional stability of 17 well-known CEOs. They

found that CEO emotional stability was positively

related to TMT cohesion and intellectual flexibil-ity. Again, we are aware of no studies that have

examined self-efficacy in executive samples.

Related constructs in the study of executives

In addition to studies that have examined the com-

ponents of CSE at the executive level, several

works have discussed other constructs that are

related to CSE, particularly narcissism, overcon-

fidence, and hubris (summarized in Table 3). It is

useful to differentiate and relate each to the con-

cept of CSE.

Narcissism

At its most basic, narcissism is self-love. A healthyamount of narcissism is necessary for successful

functioning; it is based on secure self-esteem that

allows one to survive everyday life (Kets de Vries,

1994). An unstable sense of self-esteem, however,

can lead to excessive self-love in an attempt to

compensate. It is this danger of excess that gives

narcissism its derogatory connotation and causes

it to become a psychopathological condition (Kets

de Vries, 1994). Reactive narcissists (those who

have the pathological form) have a grandiose sense

of self-importance, take advantage of and devalue

others, and live under the illusion that their prob-

lems are unique and especially burdensome. They

feel entitled to be treated specially and to get

their way, are addicted to compliments, and lack

empathy (Lubit, 2002). A considerable amount has

been written about narcissism in executives (e.g.,

Bedeian, 2002; Kets de Vries, 1994; Kets de Vries

and Miller, 1985; Lubit, 2002), though most writ-

ings have been theoretical or case study observa-

tions rather than large-sample empirical research.

Our interpretation of the work on narcissism leads

us to conclude that CSE is highly related to healthy

narcissism but unrelated (and possibly negatively

related) to unhealthy reactive narcissism.

Overconfidence

Overconfidence is an overestimation of certainty

about being correct or producing a certain out-

come (Russo and Schoemaker, 1992). The ten-

dency for individuals to overestimate their abili-

ties and chances for success has been examined

extensively in the literature on negotiations and

decision-making (e.g., Bazerman and Neale, 1982;

Busenitz and Barney, 1997; Neale and Bazerman,

1985), primarily with an eye toward the idea thatoverconfidence occurs more in some decision sit-

uations than in others. For instance, a recent paper

by Simon and Houghton (2003) found that a sam-

ple of computer executives were more overconfi-

dent (measured as the differential between a priori

estimates of success and ex post results) about

highly novel product introductions than they were

about more incremental product introductions.

It has been rare, however, for researchers to con-

sider the idea that overconfidence emanates from

individual differences. One exception is a recent

study in finance by Malmendier and Tate (2003),



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Table2.Summaryofempiricalresear

choncoreself-evaluationsandcomponenttraitsattheexecutivelevela

Trait

Study

Researchmethod

Executivesample

Findings

Coreself-evaluations

(CSE)

Noextantresearch

Self-esteem

Berry(1978)

Self-reportedquestionnairesurvey

36CEOsandVPsofMidwestern

manufacturingfirms

Executivespartiallyattributetheirsuccess

tohighself-esteem

Generalizedself-efficacy

Noextantresearch

Locusofcontrol(LOC)

Miller,KetsdeV

ries,and

Toulouse(1982)

Interview

24CEOsinmultipleindustriesin

Quebec,Canada

HigherinternalLOCcorrelatedwith

strategicinnovation,risktaking,

environmentaldynamism,andstructural

differentiation.Relationshipsstrongerin

smallfirms

Miller(1983)

LOCandstrategyvariablesga

thered

throughsame-sourceinterviews

Topexecutivesin52mediumand

largefirmsinvariousindustrie

s

Risk-taking,innovation,andproactiveness

ofsimpleandplanningfirms(butnot

organicfirms)predictedbyLOC

oftop

executives

MillerandToulouse(1986a)Self-reportedLOCandorganizational

performance

97CEOsinmultipleindustriesin

Quebec,Canada

InternalLOCcorrelatedwithrelativ

e

performancewithindynamic

environments,andactualsalesgrowth

andnetincomegrowthinall

environments

Miller&Toulouse(1986b)

CEOself-reportedLOC(survey)and

strategy(interview).Anothe

rtop

exec.evaluatedstructureand

environment

CEOandoneothertopexecutivefrom

97firmsinvariousindustriesin

Quebec,Canada

InternalLOCpursuedmoreproduct

innovation,weremorefutureorie

nted,

andtailoredtheirstrategyto

environment.Relationshipsstrongerin

smallfirms

Govindarajan(19

89)

Self-reportquestionnairesurve

y.

Multidimensionaleffectiven

essdata

105SBUgeneralmanagers

InternalLOCpositivelyrelatedto

effectivenessforSBUswith

differentiationstrategy,butnegatively

relatedtoeffectivenessforSBUs

witha

low-coststrategy

Khanand

Manopichetwa

ttana

(1989)

Allvariablesself-reported

50CEOsofsmalltomedium-siz

ed

manufacturingfirmsinTexas

InternalLOCrelatedtoincreased

scanningandlowerageandtenure,and

environmentalscanning.LOCnot

directlyrelatedtoinnovation

Hodgkinson(199

2)

Self-reportquestionnairesurvey

91smallbusinessowner-manage

rs

InternalLOCpositivelyrelatedtos

ocial

desirability.LOCrelatedto

context-specificLOC

BooneandDeBrabander

(1993)

Interviewandself-reportsurvey

59CEOsofFlemishfurniture

companies

GeneralizedmeasureofLOCisbetter

predictiveofperformancethansituation

specificmeasureofLOCadvocatedby

Hodgkinson(1992)

(continuedoverleaf)



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Table2.(Continued)

Trait

Study

Researchmethod

Executivesample

Findings

Wally&Baum(1994)

Mainlyself-report.Decisionpace

assessedthroughresponseto

hypotheticalbusinessscenario

151manufacturingsectorCEOsin

YorkCounty,Pennsylvania

LOCnotrelatedtopaceof

decision-making,cognitivecomplexity,

centralization,orexperience.Internal

LOCrelatedtoincreasedformalization,

riskpropensity,anduseofintuition

Roth(1995)


y.

Archivalperformancemeasures

74CEOsofmedium-sizedfirms

in

nineindustries

InternalLOCpositivelyrelatedto5

-year

incomegrowthforfirmswithhig

h

internationalinterdependence;Internal

LOCnegativelyrelatedforfirms

with

lowinternationalinterdependence

Boone,DeBraba

nder,and

VanWitteloostuijn

(1996)


y.

Archivalperformancedata


companies

InternalLOCrelatedtoproduct

differentiationandperformanceb

utnot

costleadership.Negativerelationship

betweendifferentiationand

performancemitigatedbyinternalLOC

BooneandDeBrabander

(1997)

CEOself-reportedLOC.Strategy

evaluatedbyCEOandothertop

executive

CEOandatleastoneothertop

executivefrom53firmsinFlemish

furnitureindustry

Patternofrelationshipsbetween

CEO-reportedLOCandstrategy

dependentuponwhoevaluatesstrategy

(CEOorothertopexecutive).Ind

icates

ambiguityofsame-sourceself-report

data

Boone,VanOlffen,andVan

Witteloostuijn

(1998)

Simulatedbusinessgame.

Self-reportedLOC

58teamsofmanagersinEuropean

firms

Teamscomposedofpredominantly

internalLOCmembersperformed

better

thanteamspredominantlycomposedof

externalLOCmembers,whointurn

performedbetterthanmixedtea

ms

Boone,DeBraba

nder,and

Hellemans(20

00)

ReliedonLOCscoresfromBoone

etal.(1996)study.Archival

performancedata


companies

Low-performingorganizationswere

more

likelytofailwithin6yearswhen

CEO

hadexternalLOC

Emotionalstability

Peterson,Smith,

Martorana,

andOwens(2003)

PersonalityandTMTdynamic

s

assessedbyratersusingarchival

sources

17well-knownandwell-documented

CEOsandtheircompaniesfromthe

past25years

EmotionallystableCEOsweremore

dominant,andhadTMTsthatwe

re

morecohesive,moreintellectually

flexible,andlessconcernedwith

legalism.Emotionalstabilitynot

significantlyrelatedtocentralizationor

risk-taking,thoughresultsinexpected

direction

aDomain-specificvariables(suchasrolebreadthself-efficacy,organization-basedself-esteem,andspecificmeasuresoflocusofcontrol)arenotincludedinthistable,astheyarenot

consideredtobecomponentsofthebroadp

sychologicaltraitofCSE.



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Table3.Summaryofexecutive-levelempiricalresearchontraitsrelatedtocoreself-evaluations

Trait

Study

Researchmethod

Executivesample

Findings

Hubris

HaywardandH

ambrick

(1997)

Hubrismeasuredindirectly

by

proxiesofmediapraise,

CEOTMTpaydifferential,

andrecentorganizational

performance

CEOsofAmericanpubliclytraded

firmsengagingin

>$100millionacquisitions

in

1989and1992(N

=

106)

All3measuresofCEOhubris(

as

wellasaproposedunderlying

hubrisfactor)weresignifica

ntly

relatedtooverpaymentwhen

acquiringanothercompany

Overconfidence

MalmendierandTate

(2003)

Overconfidencemeasureda

s

failuretoexercisehighly

inthe

moneyoptionsandhabitually

acquiringstockoftheirown

company

477firmsfromtheForbes50

0list

fortheyears19801994

Theinvestmentdecisionsof

overconfidentCEOsaremore

responsivetoavailablecashfl

ow

SimonandHoughton

(2003)

Overconfidencemeasuredthrough

interviewandsurveyasextreme

certaintyinprojected

product-launchsuccess,

followedbysubsequentfailure

55CEOsanddirectreportsof

smallcomputercompanies

in

Georgia

Overconfidenceandextremecertainty

predictedtheextenttowhich

a

productlaunchwaspioneering

(risky).Pioneeringnegatively

relatedtoachievedsuccess

Narcissism

Noempiricalresearch



10/23


who examined the relationship between CEO over-

confidence and corporate investment. They identi-

fied overconfident CEOs as those who fail to exer-cise stock options that are highly in the money

and who habitually acquire stock of their own com-

pany. They found that these overconfident CEOs

invested a higher percentage of the companys cash

flow in investment projects (rather than releasing

it as dividends) than did CEOs who were not over-

confident. As a result, overconfident CEOs whose

companies had significant amounts of available

cash ended up investing in many projects that they

shouldnt have, presumably because the CEOs had

inflated estimations of their personal abilities to

produce success.

Hubris

Like narcissism, hubris has its origins in Greek

mythology; it refers to exaggerated self-confidence

or pride (often with the connotation that retribu-

tion will follow) (Hayward and Hambrick, 1997).

The first prominent mention of hubris in the lit-

erature on top executives was by Richard Roll

(1986), who was otherwise at a loss for explain-

ing why CEOs make large corporate acquisitions

despite well-known evidence that such deals gener-

ally do not deliver the hoped-for results. Hayward

and Hambrick (1997) extended and tested Rolls

hubris hypothesis, not by examining whether

CEOs make acquisitions or not, but by examin-

ing how much above pre-bid market prices that

CEOs pay for acquisitions. This measure of acqui-

sition premium (which averaged 47% and ranged

as high as 100%) directly reflected the acquiring

CEOs assessment of how much more valuable

the acquired company would be if it were under

his/her management. Lacking any direct measure

of CEO hubris, Hayward and Hambrick relied on

three indicators, or proxies, of sources of hubris.The first two measures, the companys recent per-

formance under the CEO and recent media praise

for the CEO, were situational conditions that were

thought to generate hubris. The third measure, the

ratio of the CEOs pay relative to the second-

highest paid executive, was thought to capture the

CEOs sense of self-importance, which is per-

haps more of a stable individual trait. All three

measures were highly related to the size of acquisi-

tion premiums, and the three formed an underlying

hubris factor that was a stronger predictor of pre-

miums than were any of the individual indicators.

Hayward and Hambricks study highlights dual

merits of launching a research stream on executive

core self-evaluations. First, their results stronglysuggest that executives make decisions on the basis

of how full they are of themselves; thus it appears

that the essence of CSE matters in the execu-

tive arena. Second, Hayward and Hambricks use

of proxy indicators of hubris, which captured a

mixture of presumed situational and dispositional

factors, indicates the pressing need for a psycho-

metrically grounded and validated construct for

studying extreme self-confidence in executives. We

believe hyper-CSE is exactly that construct. That

is, the upper reaches of CSE may be thought of as

a scientifically validated hubris factor.In sum, prior research on the conceptually sim-

ilar notions of executive narcissism, overconfi-

dence, and hubris helps to inform our understand-

ing of high-CSE executives. Most notably, a very

high level of CSE may exactly correspond to what

is colloquially referred to as hubris.

Expected distribution of CSE among

executives

Research in the upper-echelons tradition is based

on the premise that executives vary enough in their

characteristics so as to yield differences in theirbehaviors (Hambrick and Mason, 1984). Accord-

ingly, in order for CSE to be a useful addition to

research on top executives, there must be mean-

ingful variance. In this section, we describe what

we anticipate the CSE distribution to be among top

executives. We argue that executives, on average,

have higher CSEs than the general population, but

that they also exhibit sufficient variability to allow

research on their differences.

Although central personality traits are largely

stable over time in adulthood (Costa et al., 2000;

McCrae and Costa, 2003), there is compelling evi-dence that some aspects of personality and identity

can change as a result of life circumstances (Franz,

1994; Miller and CdeBaca, 1994; Trzesniewski,

Donnellan, and Robins, 2003; Weinberger, 1994).

Adopting this integrative view, we consider a per-

sons CSE to be largely shaped by genetic factors

and during formative years, then reinforced (or

diminished) by long-term feedback processes, and,

finally, subject to further adjustments in the face of

recent life events (Weinberger, 1994). That is, indi-

viduals are prone to a given level of CSE, which

can change moderately as a result of long-term



11/23


conditioning and can change still more (but to a

lesser extent) as a result of recent occurrences. The

idea that CSE is somewhat malleable is especiallyapt, we believe, for senior executives.

We anticipate that it will be those who have rel-

atively high intrinsic CSE at the outset of their

careers who will advance. Among the qualities

known to be valuable in managerial settings is self-

confidence. Not only is self-confidence thought to

be substantively valuable, because it allows the

manager to create and seize opportunities, as well

as overcome obstacles; but the external appearance

of self-confidence is also valuable, for its moti-

vational power and its potential to reassure con-

stituents that the organization is in capable hands(Barnard, 1938; Bass, 1990; Keegan, 1987). In this

vein, self-ratings of CSE are found to relate to

managerial performance ratings and achievement

of objective performance criteria (Erez and Judge,

2001; Judge and Bono, 2001).

In addition to having had higher CSEs from the

outset, we expect that many executives will expe-

rience an enhancement of their CSEs during their

rise through their organizations. Most senior exec-

utives, particularly those in large organizations,

have achieved their positions by winning a long

series of rigorous promotion tournaments (Lazearand Rosen, 1981). Relative to their peers along the

way, these tournament winners have been repeat-

edly deemed to have superior skill, intelligence,

motivation, persistence, and other valuable qual-

ities. Although defective advancement processes

are possible, we can assume that top executives

are generally, or at least disproportionately, potent;

and they have had their potency reaffirmed and

reinforced with each promotion. As partial support

for our portrayal of executives as having higher

CSEs, on average, than the general population,

research that has found that executives tend toscore disproportionately as internals on the locus

of control construct, one of the components of CSE

(Govindarajan, 1989; Miller, 1983; Miller et al.,

1982).

Finally, once they reach the top, executives

CSEs can still change within a range. There may

be a general tendency for enhancement of exec-

utive CSE, due to the flattery and bolstering

top executives often receive from those around

them (Doyle, 1994; Bedeian, 2002). Moreover,

work roles are central to many individuals defini-

tions of self-concept (Brockner, 1988; Tharenou,

1979). Those who are at the top of their orga-

nizations, and who have committed themselves

to job and career performance, may especiallyexperience rises and falls in self-evaluations par-

alleling their work outcomes. Thus, an execu-

tives CSE might rise or fall somewhat, depending

on recent orespeciallysustained performance.

Those who have experienced a long run of suc-

cesses may show an increased CSE; those who

have experienced several recent setbacks may have

a somewhat diminished CSE (Hayward and Ham-

brick, 1997).

Despite our assumption that executive CSE

tends to be somewhat higher than in the gen-

eral population, it would be a mistake to concludethat executives have uniformly high CSEs. Indeed,

locus of control (a CSE component), for example,

has been shown to have meaningful variance in

numerous samples of top executives, with stan-

dard deviations only slightly smaller than in non-

executive populations (e.g., Blau, 1993; Govin-

darajan, 1989; Miller, 1983; Miller et al., 1982).

There also has been evidence found for variance in

measures of task-specific self-efficacy, overconfi-

dence, and hubris at the executive level (Hodgkin-

son, 1992; Hayward and Hambrick, 1997; Mal-

mendier and Tate, 2003). Further supporting the

idea that variance exists, it is important to note

that not every executive has risen through a series

of demanding tournaments in lustrous compa-

nies. Some executives head small or medium-

sized companies; some have arrived at their posi-

tions through family connections or politicized

processes; some are in their positions precisely

because they are not self-assured or confident, hav-

ing been selected for their pliancy or timidity,

possibly by domineering CEOs or owners (e.g.,

Collins and Moore, 1970). In short, not every

executive is at the very high end of the CSE

scale.Figure 2 displays the distributions of CSE we

would expect from a sample of executives, as com-

pared to the general population. (Both of these

curves are stylized, inasmuch as Judge and col-

leagues have not reported the actual shape of CSE

distributions for any of their samples.) As shown,

we anticipate that executives exhibit significant

range in their CSEs, but tend to score higher than

the general population. Notably, we expect that

a significant proportion of executives have CSEs

toward the upper end of the scale, or what might

be called hyper-CSE.



12/23


Figure 2. The proposed distribution of core self-evaluation levels in the general population and executive population

We use the term hyper-CSE only for ease of

exposition, not to suggest that executives who are

at the very upper end of the continuum differ qual-

itatively, or in a step function fashion, from those

whose CSEs are only slightly lower (or simply

high). At this early stage of theory development

about executive CSE, we see the construct as a

continuum, and executives as differing incremen-

tally, but meaningfully, along it.

Summary portrayal of the hyper-CSE

executive

At this point, it is useful to develop a compos-

ite portrayal of the executive who has very high

CSE, or hyper-CSE, based upon our understand-

ing of the construct developed by Judge and col-leagues, as well as its four component traits. At

their coreextending beyond, but including their

work lives hyper-CSE executives are exceed-

ingly confident and full of self-regard and self-

worth. They are sure of their abilities, and they

believe deeply that the application of their abili-

ties will bring positive outcomes. They are free of

anxiety and have little concern about negative out-

comes because they possess a core conviction that

they can surmount adversity and repair all prob-

lems. In short, hyper-CSE executives are sure they

will prevail.

IMPLICATIONS FOR STRATEGICDECISION-MAKING

Upper-echelons researchers have examined associ-

ations between executive characteristics and a wide

array of outcome variables, including elements

of organizational strategy, structure, and perfor-

mance (summarized in Finkelstein and Hambrick,

1996). We believe that CSE provides a conceptual

lever for understanding strategic outcomes which

have so far been under- or unexamined by exist-

ing executive personality research. Following from

the work of Judge and co-authors (e.g., Judge,

Erez, Bono, and Thoresen, 2002), we anticipate

that CSE will yield stronger predictions of these

outcomes than any of the four component traits.

In this section, we develop an integrated set ofpropositions that describe the effects of executive

CSE on decision-making, specifically on strategic

decision processes, strategic choices, and organi-

zational performance (summarized in Figure 3).

In a later discussion of future research opportuni-

ties, we will briefly note additional implications of

executive CSE for such domains as interpersonal

relations and top management team composition

and processes.

Because executives must have considerable

authority and discretion in order for their biases to

be reflected in organizational outcomes (Hambrick



13/23


Figure 3. Effects of executive CSE on strategic processes, strategic choices, and organizational performance

and Finkelstein, 1987), we refer in all our propo-

sitions to chief executive officers (CEOs), the top-

most officials of organizations. We do not rule out

the influence that CSE may hold in other execu-

tive positions, nor do we mean to discount the role

of the entire top management team in generating

organizational outcomes (Hambrick and Mason,

1984). Following from a number of prior stud-

ies that have found CEO characteristics (including

personality variables) to be reflected in organiza-

tional outcomes (summarized in Finkelstein and

Hambrick, 1996), we formally focus on CEOs,who are typically in the strongest position to

influence and shape what occurs in the organi-

zation. Yet, it should also be noted that not all

CEOs have equal discretion (Hambrick and Finkel-

stein, 1987). Therefore, executive discretion, or

latitude of action, should be considered to be a

latent, unspecified moderator of the associations

we propose.

Strategic decision processes

Researchers have long been interested in the pro-cesses that organizations employ in making major,

strategic decisions, or what Barnard (1938) termed

the technique of decision (Mintzberg, 1978;

Quinn, 1980). Research has found that a given

organization tends to adopt a distinctive, recurring

approach to decision-making, which it applies time

after time, across an array of decision types (Weick,

1979; Fredrickson and Mitchell, 1984). Moreover,

there is evidence that the CEOs style and prefer-

ences affect the nature of the organizations deci-

sion processes (Miller et al., 1982). We anticipate

that a CEOs core self-evaluation will influence

the degree to which strategic decision-making is

(non-)comprehensive, fast, and centralized.

Fredrickson and Mitchell (1984) established the

construct of comprehensiveness as a way to

study a then-lively debate about the merits of

careful, systematic, synoptic decision-making vs.

best-guess, trial-and-error approaches. In further

work, Fredrickson (1984) observed that compre-

hensiveness could occur at four stages in an orga-

nizations decision process: situation diagnosis,

generation of alternatives, evaluation of alterna-

tives, and decision integration. In his empiricalresearch, Fredrickson found that organizations tend

to adopt a characteristic degree of comprehen-

siveness across all four stages (such that overall

decision comprehensiveness is a valid concept),

and that there is a negative association between

decision comprehensiveness and performance in

highly dynamic, uncertain industries (and a pos-

itive association in stable industries) (Fredrickson

and Mitchell, 1984; Fredrickson, 1986).

We can expect that hyper-CSE executives will

not be inclined toward decision comprehensive-

ness. Filled with confidence, these executives be-lieve they possess valuable personal insights or

understanding of their strategic situations and

available alternatives, such that they will not feel

the need to exhaustively gather, analyze, and dis-

cuss data. We can expect that high-CSE executives

will form their strategic conclusions on the basis

of fewer pieces of information than will moderate-

CSE executives. Adding to the hyper-CSE execu-

tives propensity to act instinctively is his/her deep

belief that any unforeseen problems that might

arise because of the decision can be successfully

overcome. Thus:



14/23


Proposition 1: The greater a CEOs core self-

evaluation, the less comprehensive will be the

organizations strategic decision-processes.

Following directly from their tendency toward

non-comprehensiveness, we can anticipate that

high-CSE executives also engage in relatively fast

decision-making. Because they are willing to act

on the basis of incomplete information, and with-

out extensive analysis, high-CSE executives tend

to make moves faster than moderate-CSE exec-

utives. In a competitive context, strategic moves

might include offensive initiatives (new product

launches, acquisition bids, geographic expansion,

etc.) or responses to other firms actions (MacMil-

lan, McCaffery, and Van Wijk, 1985; Hambrick,

Cho, and Chen, 1996).

Speed of decision-making has received consid-

erable attention in recent years, because of its

importance for coping with hyper-competitive

(DAveni, 1994) or high-velocity (Eisenhardt,

1989) environments. Empirical support for the

importance of organizational speed comes from

Judge and Miller (1991), who found that deci-

sion speed was strongly associated with both

sales growth and profitability in the biotechnol-

ogy industry; and from Hambrick et al. (1996),who found that speed in both initiating actions

and responding to competitors actions were highly

related to market share gains in the airline industry.

We are aware of only one study that has con-

sidered the influence of executive psychologi-

cal properties on decision speed. In a study of

151 manufacturing companies, Wally and Baum

(1994) found that executive tolerance for risk,

optimism, psychological flexibility, and willing-

ness to use intuition were all related to decision-

making speed. Of these variables, optimism is most

closely related to CSE. Wally and Baum foundthat executive locus of control was not signifi-

cantly related to decision speed (although the coef-

ficient was in the expected direction, with internal

locus of control executives acting somewhat faster

than external executives). Given that CSE has been

shown to have greater predictive power than any

of its component variables, including locus of con-

trol (discussed earlier), we speculate that signif-

icant results would have been obtained if CSE,

rather than locus of control, had been examined.

We anticipate that when the individuals belief in

control is combined with the other elements of core

self-evaluation, the overall combination of self-

confidence and self-potency will lead high-CSE

executives to make fast decisions:


evaluation, the faster will be the organizations

strategic decision-making.

An additional way to think about decision pro-

cesses is in terms of where major decisions get

made, particularly the degree of decision central-

ization.2 Organizations vary in the degree to which

they centralize their decision-making (Fredrick-

son, 1986), or concentrate decision rights at the

top of the organization (Fry and Slocum, 1984;Mintzberg, 1979). In some organizations, strate-

gic decisions emanate from lower levels (Bower,

1970; Burgelman, 1983), leaving top executives

little role but ratification.

Most research on the determinants of decision

centralization has focused on environmental and

organizational factors, showing that stable environ-

ments and small, simple organizations tend to be

associated with centralization, while dynamic envi-

ronments and large, complex organizations tend

to engender (and benefit from) decentralization

(Pugh et al., 1968; Van de Ven, 1976). Researchhas also examined the links between CEO person-

ality and centralization. Perhaps most prominent

is Miller and Droges (1986) study of 93 Cana-

dian companies, which found that CEO need for

achievement was strongly associated with central-

ization. This relationship was stronger for long-

tenure CEOs than for short-tenure CEOs, support-

ing the authors view that CEOs manifest their

personalities in their organizational design, rather

than being drawn to organizations that suit their

personalities.

It can be expected that high-CSE chief execu-

tives will favor highly centralized strategic deci-sion processes, primarily so that they themselves

will be involved in the organizations major delib-

erations and determinations. High-CSE executives

believe that they personally possess valuable in-

sights and skills. Moreover, they hold the core con-

viction that their effortstheir personal efforts

lead to favorable outcomes. It is unlikely that such

2 Centralization can also be thought of as a structural feature(Fredrickson, 1986). However, since the term usually encom-passes the organizations approach to where decisions are made,it also comprises part of the decision process.



15/23


executives would embrace the idea that others in

the organization can make a given decision as well

as they can; nor would they want to defy theirconviction that effort equals reward.3 High-CSE

executives will tend not to delegate and will prefer

to act unilaterally. Thus:


evaluation, the more centralized will be the

organizations strategic decision-making.

Strategic choices

In addition to its effects on decision processes,

executive CSE is expected to influence the orga-nizations actual strategic choices, or resource

deployments. Some of the effects of CSE on strate-

gic choices may be mediated by the decision pro-

cesses described above, while some of its effects

may be direct. We discuss how a CEOs level of

CSE will shape the degree to which the organi-

zation undertakes quantum (as opposed to incre-

mental) initiatives, pursues deviant (as opposed to

conformist) strategies, and persists with initiatives

launched by the CEO.

Strategic initiatives may be either incremental

or quantum in nature (Quinn, 1980). Incremen-

tal strategies involve relatively modest outlays, astep-at-a-time philosophy, and typically allow con-

siderable reversibility (Ghemawat, 1991; Chen and

MacMillan, 1992). In contrast, quantum initiatives

abruptly place more of the organizations resources

at risk, and, by their very nature, are difficult to

reverse. Examples of quantum strategic initiatives

include large-scale R&D spending, large capital

outlays for specialized assets, and large acquisi-

tions.

Rolls (1986) hubris hypothesis for explain-

ing why CEOs make large-scale acquisitions envi-

sioned that highly confident CEOs are willing toengage in large-stakes, quantum initiatives because

they are sure they will recoup their investment.

We similarly anticipate that hyper-CSE CEOs will

3 It is interesting to consider the possibility that some high-CSE executivesespecially those who are politically or sociallyastutewill engage in centralized, unilateral decision-making,but still allow others in the organization to have the impressionthat they have a voice or input to the decision. By manipulatingthe process, the CEO can create the appearance of decentralizedand comprehensive decision-making, even though he or shesimply seeks an elaborate ratification of a top-down choice. Weare indebted to an anonymous reviewer for raising this intriguingpossibility.

be relatively prone to undertake large-scale ini-

tiatives. These executives are sure of themselves,

highly confident. They are not only sure of thewisdom of their decisions per se, but also sure

of their abilities to successfully implement their

decisions. High-CSE executives may be more will-

ing to undertake large-stakes, quantum initiatives

(which are, in an objective sense, riskier) because

they perceive less risk (see Wiseman and Gomez-

Mejia, 1998). Moreover, they believe they can suc-

cessfully overcome any problems that may arise

after the large up-front outlays are made. In con-

trast, CEOs who have only moderate levels of CSE

harbor some amount of self-doubt, and they have

some concerns about unforeseen external forcesruining their investments. As such, moderate-CSE

executives will tend to favor more incremental ini-

tiatives.4


evaluation, the greater the number and scale of

quantum, large-stakes initiatives undertaken by

the organization.

In recent years, strategy scholars have become

interested in the concept of strategic conformity,

or the degree to which a focal firm looks andbehaves like the modal (or typical) firm in its

industry (Deephouse, 1999; Rindova, Pollock, and

Hayward, in press). On the one hand, imitation

provides legitimacy (DiMaggio and Powell, 1983);

but on the other hand, it rules out differentia-

tion in a competitive market space (Noda and

Collis, 2001). Although the literature on strate-

gic imitation has focused primarily on the role

of uncertainty in causing isomorphic behavior

(DiMaggio and Powell, 1983; Haveman, 1993),

researchers also have considered how the charac-

teristics of corporate decision-makers can promptconformity or imitation. In this vein, for example,

Davis (1991) found that the adoption of poison

pill anti-takeover provisions diffused from com-

pany to company through interlocked directors;

Finkelstein and Hambrick (1990) found that long-

tenured top management teams (TMTs) exhibited

4 Judge and co-authors have not formally considered the relation-ship between CSE and risk propensity. In one study, however,they found a correlation of 0.50 between CSE and a measure ofrisk tolerance (Judge, Thoresen, Pucik, and Welbourne, 1999).Thus, although risk propensity is not an element of CSE, it islikely to be an accompaniment or outgrowth of CSE.



16/23


more strategic conformity to the central tenden-

cies of their industries than did newer TMTs;

and Geletkanycz and Hambrick (1997) found thatTMTs whose members were well connected to

other firms in the focal industry tended to pursue

strategies that conformed more to industry central

tendencies than did those whose members lacked

such ties.

What has not yet been considered is the pos-

sibility that executive personality influences con-

formist, or nonconformist, behavior. The concept

of core self-evaluation, however, presents just such

a possibility. Possessing a high level of self-

confidence, the hyper-CSE executive does not need

for others to validate a course of action. Strategicideas emanate from his/her own valuable insights,

and those ideas are tested against an internal men-

tal model that possesses its own reliability. Inso-

far as uncertainty prompts imitation, the hyper-

CSE executivewho possesses little doubt or

uncertainty will not feel the need to conform

to the strategies of others. While others may see

deviance from industry conventions as risky, the

ultra-confident, high-CSE executive is not likely

to perceive as much risk in such actions.

Support for this line of thought also comes from

behavioral modeling theory (e.g., Bandura, 1977),

which suggests that individuals are more likely to

imitate the behavior of a model when they are

uncertain about how to act themselves. Individuals

with low self-esteem (a component of CSE) tend

to be relatively uncertain about the appropriateness

of their behavior, and thus may be more heavily

influenced by the actions of a model (Brockner,

1988). In a related vein, studies by Miller and

colleagues (Miller et al, 1982; Miller, 1983; Miller

and Toulouse, 1986a) have shown that executive

locus of control (a component trait of CSE) is

related to strategic innovation, which is usually

nonconformist behavior. Thus:


evaluation, the more the organizations strategy

will deviate from the central tendencies of the

industry.

Strategic persistence, the degree to which the

firms strategy remains unchanged over time, is

another important component of strategic choice

(Finkelstein and Hambrick, 1990). Organizational

decision-makers are steadily confronted with con-

flicting signals (Starbuck and Milliken, 1988).

Some signals indicate that the organization is on

the right path and that future success hinges on a

continuation of current strategy, while other sig-nals indicate that the current strategy is leading

to trouble (or to less success than another strat-

egy might bring). Because these conflicting data

are often noisy and ambiguous, and they emanate

from sources that vary in their familiarity and

reliability, they are subject to a great deal of per-

sonalized selective perception and interpretation by

the decision-maker (Mischel, 1977; Hambrick and

Mason, 1984). As a result, there is a tendency for

individuals to become committed to their own prior

actions and resist changing their behavior, even

when the chosen course is not yielding success(Staw and Fox, 1977; Fox and Staw, 1979; Staw

and Ross, 1987).

Strategic persistence has been found to be a

function of executive tenure (Finkelstein and Ham-

brick, 1990), as well as of executive personality.

For example, Kisfalvi (2000) related strategic per-

sistence to an executives needs for autonomy,

success, and recognition. In a simulation study,

Audia et al. (2000) found that confidence and self-

efficacy were significant predictors of dysfunc-

tional persistence in the face of environmental

changes. Similarly, Whyte, Saks, and Hook (1997),

in a study of undergraduates, found that high task-

specific self-efficacy was a significant contribu-

tor to economically irrational escalation of com-

mitment to a losing course of action. Extending

the argument to CSE, we expect that high-CSE

executives are relatively likely to persist in their

chosen strategies, because of their extreme con-

fidence in their decisions, in their ability to suc-

cessfully implement their decisions, and in their

ability to overcome any post-decision challenges.

We expect high-CSE executives to persist in their

chosen strategies even in the face of disconfirming

evidence.


evaluation, the greater the organizations per-

sistence in pursuing strategies that were launch-

ed by the CEO.

In sum, then, we anticipate that a CEOs self-

concept, as gauged by his or her core self-evalu-

ation, will significantly influence the way in which

an organization makes its strategic decisions, as

well as the nature of the choices made. In par-

ticular, the high degree of self-confidence and



17/23


self-potency of the hyper-CSE chief executive will

lead to non-comprehensive, fast, and centralized

decision-making, and also to quantum, noncon-formist strategic initiatives that the organization

will pursue with persistence.

Organizational performance

If CSE affects strategic decision processes and

choices, it can also be expected to affect organiza-

tional performance. Departing from Judges more

CSE is better thesis, we anticipate that hyper-CSE

executives are associated with extreme perfor-

manceeither big wins or big losses. On the one

hand, the outcomes of hyper-CSE speed, non-comprehensiveness, boldness, and deviance from

industry normscan lead to extraordinary success

(DAveni, 1994; Porter, 1980; Eisenhardt, 1989).

On the other hand, these same strategic behav-

iors can lead to catastrophe. To the extent that

high-CSE executives engage in large-scale, risky

strategic initiatives and make decisions quickly and

with little analysis, the results could be grave.

Whereas Erez and Judge (2001) found that CSE

was positively associated with performance on an

anagram completion task (among undergraduate

students) and in selling insurance policies (amonginsurance agents), we are very doubtful that this

pattern will carry over to CEOsmany of whom

are at the very upper reaches of the CSE scale.

Indeed, the picture of an executive who has the

authority and discretion to spend millions or bil-

lions of dollars and who has a belief that he or

she can do no wrong (or can fix all wrongs) is

not necessarily a pretty one. If the executive has

calculated or guessed correctly, the results could

be outstanding. However, the chances are also rel-

atively great that such impulsive, outsized moves

will lead to dire consequences. Thus we anticipate

the following:


evaluation, the more extreme the organizations

performance.

Although it is tempting to think that moderate-

CSE executives will perform better than hyper-

CSE executives, we favor the line of thought

that moderate- or moderately high CSE execu-

tives those who carry some amount of self-

doubt will perform more reliably, or have less

extreme outcomes, than will hyper-CSE executives

(who will deliver extreme, volatile performance).

Our depiction of the dangers of hyper-CSE isclearly at odds with the current wave of writings

that depict managerial confidence in only the lofti-

est and most positive of terms (Kanter, 2004; Hol-

lenbeck and Hall, 2004). We agree thatup to a

pointmanagerial confidence, and its fuller vari-

ant, CSE, are exceedingly beneficial for propelling

action and motivating others; but we believe that

beyond that point, or at the extreme, managerial

confidence and hyper-CSE can bring about nave,

even foolish behaviors.

In a similar vein, one might ask, how can emo-

tional stability, a component of CSE, ever be abad thing? Isnt emotional stability always benefi-

cial? Here we must recall that emotional stability,

as measured by Judge and others, primarily gauges

a persons freedom from anxiety or worry; thus, it

does not capture every aspect of emotional well-

being that the label might imply. (The obverse

label, neuroticism, is often used to describe the

construct.) What we are asserting, then, is that

executives who are completely free of anxiety or

worry (and who additionally manifest the other

elements of hyper-CSE) are highly susceptible to

flawed decision-making. Namely, we believe that

Andy Grove, the legendary CEO of Intel, was on

the right track when he said: Only the paranoid

survive (Grove, 1999).

MEASUREMENT

In order to explore the implications of CSE for

executive behavior, the construct must be amenable

to reliable measurement. Although collecting psy-

chometric measures directly from executives

(either through self- or other-reports) is difficult,it is possible, and the resulting data can hold great

explanatory power (e.g., Boone, De Brabander,

and van Witteloostuijn, 1996; Miller et al., 1982).

In cases where direct measurement is impractical,

indirect, or proxy measures of CSE may be help-

ful in enabling empirical research (Hambrick and

Mason, 1984). Indeed, the use of readily accessible

proxies for psychological variables is widespread

and has been successful (e.g., Barr, Stimpert, and

Huff, 1992; Hayward and Hambrick, 1997). In

this section, we outline some suggestions for both

direct and indirect measures.



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Almost all prior research on CSE has used an

aggregated instrument, consisting of validated full-

length measures of each of the four componenttraits (self-esteem, generalized self-efficacy, locus

of control, and emotional stability). Advocated

by Judge, Locke, Durham, and Kluger (1998),

this full-measure approach was important in the

early phases of establishing the CSE construct,

but resulted in CSE measures as long as 54 items,

which are too cumbersome for an executive sam-

ple. Recent work (Judge et al., 2003) has resulted

in the development of a 12-item measure that opti-

mally taps the central CSE construct. This newly

created scale appears to have adequate psychomet-

ric properties and to be less susceptible to rangerestriction than the previous measure. Still, it may

require additional modification for use with execu-

tives, in order to ensure that range restriction does

not obscure real differences at the high end of the

CSE scale. For research on executives, we must be

sure that we are reliably distinguishing between

those who have high CSE and those who have

very high CSE. One option for potentially allevi-

ating range restriction would be to use a 7-point

(instead of 5-point) scale, with Very strongly dis-

agree, and Very strongly agree at the ends of the

continuum. Another possible solution may involve

rewording some of the items to enhance variance.

For example, the item, When I try, I generally suc-

ceed might be reworded as, When I try, I almost

always succeed.5

Another way that CSE might be assessed is

through non-transparent psychological measures.

Given that individuals often attempt to manage

others impressions of themselves (Day et al.,

2002), executives may be unwilling (or even

unable) to accurately respond to transparent CSE

items. The Implicit Association Test (IAT; Green-

wald, McGhee, and Schwartz, 1998), which could

be adapted to measure CSE, is relatively imper-vious to self-presentation biases, and could pro-

vide a useful alternate perspective on executive

self-concept. The existing version of this test,

which assesses self-esteem, requires participants at

a computer to categorize a set of descriptors, as

quickly as possible, as being relevant to the self,

and as being positive or negative (for a review of

IAT, see Fazio and Olson, 2003). The basic idea of

5 We acknowledge that such modifications of Judges itemswould yield a somewhat different measure perhaps hyper-CSE rather than regular CSE.

this approach, which has been borne out in valid-

ity tests, is that participants will rate much more

quickly those descriptors that are central to theirself-concept than they will descriptors that are not

part of their self-concept.

Given the difficulty in obtaining cooperation

from senior executives in completing self-

evaluations, alternative assessments of CSE also

need to be considered. One possible method would

be to receive social reports of executive CSE from

others who are close to the executive. Sources

could include administrative assistants, profes-

sional direct reports, or other colleagues. While

others ratings of focal subjects CSE have limi-

tations (Judge, Erez, Bono, and Thoresen, 2002),they may not be as vulnerable to positive self-

presentation biases that can occur in self-ratings

(e.g., Harris and Schaubroeck, 1988). Social re-

ports, in and of themselves, as well as differences

between other-ratings and self-ratings, may be rich

ground for investigation.

In addition to direct measures of CSE, the cre-

ative use of indirect measures may enable addi-

tional understanding of the effects of CSE. Poten-

tial indicators of CSE (some of which have been

previously used by Hayward and Hambrick, 1997,

and Malmendier and Tate, 2003) include: promi-

nence of the CEO in the companys annual report

and press releases; content analysis of the CEOs

speeches or press releases; the pay differential

between the CEO and other TMT members; and

the CEOs behavior in exercising (or not exercis-

ing) stock options. Admittedly, each of these will

be a noisy, imprecise measure, and each will vary

as to whether it gauges CSE as an enduring trait

vs. as an emergent condition. Perhaps some of the

initial research on executive CSE should focus on

establishing the associations between pencil and

paper measures of the construct and some of these

indirect measures, in order to establish which ofthe latter may be used reliably as proxies.

FUTURE RESEARCH AND SUMMARY

The propositions we have presented regarding

the implications of executive CSE for strategic

decision-making are among the most promising

avenues for future research. However, we see the

need and opportunity for inquiries on other aspects

of this important construct. In this section, we

present a brief overview of four such possibilities.



19/23


First, it will be important to understand the

origins of CSE in executives. As a fundamen-

tal, enduring personality trait, a persons level ofCSE should be largely established by early adult-

hood (Costa and McCrae, 1994). But, just as with

other personality dimensions, it is possible as

we have arguedthat life experiences may exert

additional influences (Weinberger, 1994). It may

be, for instance, that individuals who are selected

for early managerial posts have higher CSEs than

their age-peers who do not qualify for manage-

ment. Then, those who receive promotions will

experience an elevation of their CSE; with each

additional hierarchical advance, their sense of self-

esteem and potency will be further reinforced.Those who eventually rise to the highest lev-

elsparticularly those who do so without serious

stumbles may end up with CSEs well above their

earlier levels. Then, recent job performance might

have even more of an effect; CEOs whose com-

panies have performed very well for several con-

secutive years may have their self-concept further

bolstered (which may partially account for Millers

Icarus Paradox, 1990). Likewise, those who have

encountered serious performance problems may

experience a reduction of their CSE. Examining

these possibilities is important to our understand-

ing of executive psychology.

Second, there is an opportunity to study how

executive CSE affects interactions among exec-

utives and the composition and processes of top

management teams (Hambrick and Mason, 1984).

It would be useful to learn, for example, whether

hyper-CSE CEOs tend to attract and retain other

high-CSE executives to their teams, or conversely

whether CSE is an attribute for which likes do

not match. Similarly, it would be useful to exam-

ine how the extreme confidence and sense of

self-potency of the hyper-CSE CEO affects team

dynamics, including such attributes as social cohe-sion and communication patterns (e.g., Smith et al.,

1994).

Third, given that executives tend to be attracted

to (and retained in) industries and organizations

that fit with their dispositions (e.g., Gupta and

Govindarajan, 1984; Finkelstein and Hambrick,

1996), it would be interesting to investigate the

extent to which industry and organizational charac-

teristics attract executives according to their CSEs.

It may be, for instance, that high-CSE executives

are attracted to industries that confer high levels

of discretion (Hambrick and Finkelstein, 1987).

Fourth, CSE may be an important considera-

tion in understanding executive pay. Wade, Porac,

and Pollock (2004) found that star CEOs (whowere winners in Financial Worlds CEO of the

Year competition) were relatively likely to accept

a tight linkage between pay and performance, pre-

sumably because their star status injected them

with confidence in their own abilities. CSE may

be a useful construct for further exploring this

conjecture; indeed such findings may have sig-

nificant implications for the role of individual

differences in reducing agency problems (Fama,

1980).

Researchers have long been interested in the

influence of executive self-concept on executivebehavior but have lacked a well-developed, vali-

dated construct for conducting systematic inquires.

The recent work of Judge and co-authors in estab-

lishing and validating the concept of CSE may

provide substantial leverage for research on exec-

utive self-concept. CSE, which unifies the four

previously separate concepts of self-esteem, self-

efficacy, locus of control, and emotional stability,

has been found in non-executive populations to

provide greater power in explaining outcome mea-

sures than do the component traits. Moreover, CSE

has substantially more theoretical foundation (and

measurement sophistication) than do the concepts

that have previously been invoked in the litera-

ture on executive self-assessment notably hubris,

narcissism, and overconfidence.

We anticipate that high-CSE CEOswho pos-

sess supreme levels of self-confidence, self-

potency, and conviction that they will prevail

will manifest this trait in their behaviors. We have

developed several propositions that describe the

implications of CSE for strategic decision pro-

cesses and strategic choices. We envision, how-

ever, that executive CSE might be reflected in a

wide array of executive behaviors and organiza-tional attributes (including interpersonal relations,

incentive arrangements, and organizational struc-

ture), making it a promising construct for research

on many fronts.

ACKNOWLEDGEMENTS

We gratefully acknowledge helpful comments from

Trevis Certo, David Day, Jim Detert, Dan New-

man, Tim Pollock, and Linda Trevino.



20/23


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The Role of (Hyper-)Core Self-evaluations in Strategic Decision-making